Total sales increased 2.7% (4.0% on a constant currency basis) to
$430.0 million, compared to $418.6 million in the second quarter of
fiscal 2015. Company comparable sales increased 2.5% (3.8% on a
constant currency basis);

Gross profit decreased to $149.5 million, from $162.6 million during
the same period a year ago. Gross profit as a percentage of sales was
34.8%, compared to 38.9% in the second quarter of last year. The
year-over-year decline is primarily attributable to actions taken to
reduce elevated inventory levels;

Selling, general and administrative expenses decreased 4.8% to $128.4
million, compared to $134.8 million in the second quarter of fiscal
2015;

Net income of $3.2 million; fully diluted earnings per share of $0.04;
and

Ending inventories of $533.6 million, an increase of 3.9% compared to
inventories of $513.8 million in the year ago period.

“We are disappointed with our second quarter sales and earnings
results,” said Alex W. Smith, President and CEO. “Top line growth was
below our expectations, with Company comparable sales up 3.8% on a
constant currency basis. During the period, our margins were impacted by
increased promotional and clearance activity, as well as inventory
related issues within our distribution center network. We’ve made
progress toward bringing inventories in line and remain on track to end
fiscal 2016 with year-over-year levels down meaningfully. However,
operating with elevated inventories has been a challenge. As such, and
considering our second quarter sales trend, we are tempering our
expectations for the balance of the year.”

“Despite the difficulties we are experiencing, we have continued to make
progress in many areas of the business that underscore the strength of
our omni-channel strategy. E-Commerce sales continued to demonstrate
strong growth, representing 17% of total sales in the second quarter, up
from 10% last year. As we approach the second half of fiscal 2016 and
upcoming holiday season, we have a strong mix of marketing and customer
engagement strategies – combined with fresh seasonal assortments –
designed to drive brand traffic. Looking further ahead, we are focused
on returning to a healthy inventory position and continuing to execute
our operating strategies, which we expect will position the business to
deliver profit growth in fiscal 2017.”

Second Quarter Fiscal 2016 Results of Operations

For the second quarter ended August 29, 2015, the Company reported net
income of $3.2 million, or $0.04 per share, compared to last year’s
second quarter net income of $9.2 million, or $0.10 per share. Total
sales for the second quarter increased 2.7% (4.0% on a constant currency
basis after adjusting for a 130 basis point impact attributable to the
year-over-year decline in the value of the Canadian Dollar, relative to
the U.S. Dollar) to $430.0 million, compared to $418.6 million in the
same period last year. Company comparable sales increased 2.5% (3.8% on
a constant currency basis).

Merchandise margin (the result of adding back delivery and fulfillment
net costs and store occupancy costs to gross profit) in the second
quarter totaled $234.8 million, or 54.6% of total sales, compared to
$244.5 million, or 58.4% of total sales in the second quarter of fiscal
2015. The year-over-year decline is attributable to inventory related
inefficiencies within the Company’s distribution center network, as well
as promotional markdowns and clearance activity to reduce inventory
levels. Gross profit in the second quarter totaled $149.5 million, or
34.8% of total sales, compared to $162.6 million, or 38.9% of total
sales in the second quarter of fiscal 2015. For the three months ended
August 29, 2015, contribution from operations (gross profit less
compensation for operations and operational expenses) totaled $68.5
million, compared to $81.0 million during the same period last year.

Fiscal 2016 second quarter selling, general and administrative (“SG&A”)
expenses were $128.4 million, or 29.9% of total sales, compared to
$134.8 million, or 32.2% of total sales in the year ago period. The
following table details the breakdown of selling, general and
administrative expenses for the second quarter of fiscal 2016 as
compared to the same period last year (in millions).

Three Months Ended

August 29, 2015

August 30, 2014

Expense

% of Sales

Expense

% of Sales

Compensation for operations

$

63.3

14.7

%

$

65.2

15.6

%

Operational expenses

17.7

4.1

%

16.4

3.9

%

Marketing

16.7

3.9

%

21.7

5.2

%

Other selling, general and administrative

30.7

7.2

%

31.5

7.5

%

Total selling, general and administrative

$

128.4

29.9

%

$

134.8

32.2

%

Second quarter EBITDA (earnings before interest, taxes, depreciation and
amortization) was $20.9 million, compared to $28.1 million in the second
quarter of last year. Operating income for the second quarter was $8.4
million compared to $16.5 million in the second quarter of fiscal 2015.

Year-to-Date Results of Operations

Total sales for the six months ended August 29, 2015, were $862.0
million, an increase of 2.9% from the same period last year (3.9% on a
constant currency basis). Company comparable sales increased 2.2%
year-to-date in fiscal 2016 (3.3% on a constant currency basis). For the
same period, e-Commerce represented 17% of sales, compared to 9% for the
six months ended August 30, 2014.

Merchandise margin for the six months ended August 29, 2015, totaled
$482.8 million, or 56.0% of total sales, compared to $491.0 million, or
58.6% of total sales for the same period last year. Gross profit totaled
$314.2 million, or 36.5% of total sales, compared to $330.4 million, or
39.4% of total sales for the six months ended August 30, 2014.

For the six-month period ended August 29, 2015, contribution from
operations totaled $153.3 million, compared to $172.4 million during the
same period last year.

Selling, general and administrative expenses for the six months ended
August 29, 2015, were $267.1 million, or 31.0% of total sales, compared
to $266.3 million, or 31.8% of total sales a year ago. The following
table details the breakdown of selling, general and administrative
expenses for the six months ended August 29, 2015, as compared to the
same period last year (in millions).

Six Months Ended

August 29, 2015

August 30, 2014

Expense

% of Sales

Expense

% of Sales

Compensation for operations

$

127.7

14.8

%

$

127.3

15.2

%

Operational expenses

33.2

3.9

%

30.7

3.7

%

Marketing

39.1

4.5

%

43.7

5.2

%

Other selling, general and administrative

67.1

7.8

%

64.6

7.7

%

Total selling, general and administrative

$

267.1

31.0

%

$

266.3

31.8

%

EBITDA for the six months ended August 29, 2015, totaled $47.0 million,
compared to $64.5 million in the year ago period. Operating income for
the period was $21.9 million, compared to $42.4 million for the six
months ended August 30, 2014.

Real Estate Optimization Initiative

During the second quarter of fiscal 2016, the Company closed 16 stores
and opened six – four of which were relocations – ending the period with
1,053 stores. The Company expects to end fiscal 2016 with approximately
30 net store closures.

Store Statistics

Store Count

Fiscal Period

Start

Openings

Closures

End

Relocations (1)

Three Months Ended May 30, 2015

1,065

8

(10)

1,063

6

Three Months Ended August 29, 2015

1,063

6

(16)

1,053

4

Fiscal 2016 Year-to-Date:

1,065

14

(26)

1,053

10

Three Months Ended May 31, 2014

1,072

9

(14)

1,067

3

Three Months Ended August 30, 2014

1,067

8

(2)

1,073

2

Fiscal 2015 Year-to-Date:

1,072

17

(16)

1,073

5

(1) Relocations are noted only in the period in which the new store
opens.

Balance Sheet Highlights and Share Repurchase Program

As of August 29, 2015, the Company had $41.1 million of cash and cash
equivalents, $198.0 million outstanding under its term loan, and $60.0
million in cash borrowings under its $350 million revolving line of
credit. For the six months ended August 29, 2015, cash used in operating
activities was $38.2 million below the prior year period. Inventories at
the end of the second quarter totaled $533.6 million, compared to $513.8
million at the end of the second quarter of fiscal 2015. The Company
expects third quarter fiscal 2016 ending inventories to be down on a
year-over-year basis. Capital expenditures totaled $16.7 million in the
second quarter of fiscal 2016 and were used primarily for infrastructure
and technology development in support of ‘1 Pier 1’ and new store
openings.

During the second quarter ended August 29, 2015, the Company repurchased
a total of approximately 2.7 million shares of its common stock under
its April 2014 share repurchase program for $32.4 million. Year-to-date
through the second quarter, the Company has repurchased approximately
4.0 million shares of its common stock at a cost of $50.0 million. Of
the Company’s $200 million share repurchase program announced in April
2014, $72.2 million remains available for repurchases.

Fiscal 2016 Full-Year and Third Quarter Financial Guidance

Jeffrey N. Boyer, Executive Vice President and CFO, stated, “We are
continuing to work through the near-term issues stemming from our
elevated inventory levels and have adopted a more cautious and
deliberate view of the business based on our first half trends. At the
same time, we are pursuing a number of avenues to drive additional
process improvements and further reduce expenses.”

“We see significant opportunities to expand the profitability of the
Company’s omni-channel model in the coming years,” continued Boyer.
“Pier 1 Imports has strong brand equity, an attractive market position,
a powerful omni-channel model and a team of highly talented and engaged
associates. Looking ahead to fiscal 2017, we expect to expand margins
and leverage SG&A expenses, which should allow us to improve EBITDA and
earnings per share.”

The Company provided the following updated financial guidance for
full-year fiscal 2016:

Low single-digit Company comparable sales growth, which includes
e-Commerce;

Merchandise margin, as a percentage of sales, of approximately 55.5%
to 56%;

Selling, general and administrative expenses, as a percentage of
sales, leveraging approximately 100 basis points;

EBITDA margins of approximately 7.5% to 8%;

Depreciation of approximately $52 million;

Operating income, as a percentage of sales, of approximately 5% to
5.5%;

Earnings per share in the range of $0.56 to $0.64, utilizing a fully
diluted share count of approximately 87 million shares; and

Capital expenditures of approximately $60 million.

The Company provided the following guidance for the third quarter of
fiscal 2016:

Company comparable sales growth, which includes e-Commerce, in the
low-single digits; and

Earnings per share in the range of $0.10 to $0.14, utilizing a fully
diluted share count of approximately 86 million shares.

Declaration of Quarterly Cash Dividend

The Company announced that its Board of Directors declared a $0.07 per
share quarterly cash dividend on the Company’s outstanding shares of
common stock. The $0.07 quarterly cash dividend will be paid on November
4, 2015, to shareholders of record on October 21, 2015. As of September
23, 2015, approximately 87.1 million shares of the Company’s common
stock were outstanding.

Second Quarter Results Conference Call

The Company will host a conference call to discuss second quarter fiscal
2016 financial results at 3:30 p.m. Central Time today. Investors will
be able to connect to the call through the Company’s website at
Pier1.com. The conference call can be accessed by selecting “About” on
the homepage and linking through the “Investor Relations” page to the
“Events” page, or dialing 1-800-498-7872, or if international,
1-706-643-0435. The conference ID number is88750371.

A replay will be available after 6:30 p.m. Central Time today for a
24-hour period and the replay can be accessed by dialing 1-855-859-2056,
or if international, 1-404-537-3406 using conference ID number 88750371.

Financial Disclosure Advisory

The Company reports its financial results in accordance with U.S.
generally accepted accounting principles (GAAP). This press release
references non-GAAP financial measures including merchandise margin,
contribution from operations, EBITDA and constant currency.

The Company believes that the non-GAAP financial measures included in
this press release allow management and investors to understand and
compare results in a more consistent manner for the three- and six-month
periods ended August 29, 2015 and August 30, 2014. Non-GAAP financial
measures should be considered supplemental and not a substitute for the
Company’s results reported in accordance with GAAP for the periods
presented.

Merchandise margin represents the result of adding back delivery and
fulfillment net costs and store occupancy costs to gross profit.
Contribution from operations represents gross profit, less compensation
for operations (which includes store and customer service payroll) and
operational expenses. EBITDA represents earnings before interest, taxes,
depreciation and amortization. Management believes merchandise margin,
contribution from operations and EBITDA are meaningful indicators of the
Company’s performance which provide useful information to investors
regarding its financial condition and results of operations. Management
uses merchandise margin, contribution from operations and EBITDA,
together with financial measures prepared in accordance with GAAP, to
assess the Company’s operating performance, to enhance its understanding
of core operating performance and to compare the Company’s operating
performance to other retailers. These non-GAAP financial measures should
not be considered in isolation or used as an alternative to GAAP
financial measures and do not purport to be an alternative to net income
or gross profit as a measure of operating performance. A reconciliation
of net income to EBITDA to contribution from operations to merchandise
margin is shown below for the periods indicated (in millions).

Three Months Ended

Six Months Ended

August 29, 2015

August 30, 2014

August 29, 2015

August 30, 2014

$ Amount

% of Sales

$ Amount

% of Sales

$ Amount

% of Sales

$ Amount

% of Sales

Merchandise margin (non-GAAP)

$

234.8

54.6

%

$

244.5

58.4

%

$

482.8

56.0

%

$

491.0

58.6

%

Less:

Delivery and fulfillment net costs

9.6

2.2

%

6.8

1.6

%

18.4

2.1

%

12.0

1.4

%

Store occupancy costs

75.6

17.6

%

75.1

17.9

%

150.2

17.4

%

148.6

17.8

%

Gross profit (GAAP)

149.5

34.8

%

162.6

38.9

%

314.2

36.5

%

330.4

39.4

%

Less:

Compensation for operations

63.3

14.7

%

65.2

15.6

%

127.7

14.8

%

127.3

15.2

%

Operational expenses

17.7

4.1

%

16.4

3.9

%

33.2

3.9

%

30.7

3.7

%

Contribution from operations (non-GAAP)

68.5

15.9

%

81.0

19.4

%

153.3

17.8

%

172.4

20.6

%

Less:

Other nonoperating (income)/expense

0.2

0.1

%

(0.3

)

(0.1

%)

0.1

0.0

%

(0.5

)

(0.1

%)

Marketing and other SG&A

47.4

11.1

%

53.2

12.7

%

106.2

12.3

%

108.3

12.9

%

EBITDA (non-GAAP)

20.9

4.9

%

28.1

6.7

%

47.0

5.5

%

64.5

7.7

%

Less:

Income tax provision

2.0

0.5

%

5.6

1.3

%

6.0

0.7

%

14.6

1.7

%

Interest expense, net

3.0

0.7

%

2.1

0.5

%

5.9

0.7

%

4.0

0.5

%

Depreciation and amortization

12.8

2.9

%

11.3

2.8

%

25.1

3.0

%

21.7

2.5

%

Net income (GAAP)

$

3.2

0.7

%

$

9.2

2.2

%

$

10.0

1.2

%

$

24.2

2.9

%

This press release also references total sales and company comparable
sales on a constant currency basis, which is calculated by translating
the current and prior periods into comparable amounts using the same
foreign exchange rate. Management believes these non-GAAP financial
measures are useful when comparing sales results between periods when
foreign exchange rates are volatile.

This press release may be deemed to include forward-looking statements
that are based on management’s current estimates or expectations of
future events or future results. These statements are not historical in
nature and can generally be identified by such words as “believe,”
“expect,” “estimate,” “anticipate,” “plan,” “may,” “will,” “intend” and
similar expressions. Management’s expectations and assumptions regarding
future results are subject to risks, uncertainties and other factors
that could cause actual results to differ materially from the
anticipated results or other expectations expressed in the
forward-looking statements included in this press release. These risks
and uncertainties include, but are not limited to, consumer spending
patterns, inventory levels and values, the Company’s ability to
implement planned cost control measures, expected benefits from the real
estate optimization initiative, including cost savings and increases in
efficiency, and changes in foreign currency values relative to the U.S.
Dollar. These and other factors that could cause results to differ
materially from those described in the forward-looking statements
contained in this press release can be found in the Company’s Annual
Report on Form 10-K and in other filings with the SEC. Refer to the
Company’s most recent SEC filings for any updates concerning these and
other risks and uncertainties that may affect the Company’s operations
and performance. Undue reliance should not be placed on forward-looking
statements, which are only current as of the date they are made. The
Company assumes no obligation to update or revise its forward-looking
statements.

Pier 1 Imports, Inc. is the original global importer of home décor and
furniture. Information about the Company is available on www.pier1.com.